Are Short-Sighted Sprint Investors Throwing Out The WiMax Opportunity With Forsee?

As per the rumors circulating for just a few days, activist investors,
and disgruntled shareholders have ousted Sprint CEO Gary Forsee. There
are three main reasons for the ouster — and not all of them make sense.

  1. Sprint has a relatively high churn rate among the majors, and is
    acquiring new customers much more slowly than chief wireless rivals AT&T
    and Verizon. For the next quarter, Sprint has issued guidance that they
    will suffer a net loss of over 300k subscribers, which is atrocious in a
    time when AT&T and VZW are net adding about 1.5M each. There seems to be
    no resonating marketing message, and the brand is suffering.

    My take: This is a problem that can be blamed on Sprint
    management and marketing execs, and possibly right up to Forsee. Sprint
    needs to find a message that resonates with customers, stick to it, and
    rebuild the brand. Realistically, their service is scarcely better or
    worse than the other oligopilists, but the perception is that it is

  2. The Nextel merger is not going as well as expected, with delays in
    integration, and frustration and churn among Nextel’s formerly loyal
    blue-collar Push-to-talk (PTT) base. Prior to acquisition, Nextel was the
    goose that laid golden eggs, with ~$70 ARPU, but that goose is plucked.

    My take: The roots of this problem stem from the “Nextel
    Spectrum Swap”
    that was in motion long before Sprint stepped in. Nextel
    is vacating spectrum that it promised not to use because it was
    interfering with Public Safety radios in the 800MHz band. As it vacates,
    existing Nextel users are getting crammed into a smaller band, and
    quality is suffering. The only cure is to speed up the rollout of EV-DO Rev.A, and get
    Nextel users migrated to PTT services over CDMA. Sprint is showing every
    sign of doing this, so is there any executive culpability? Perhaps the
    Nextel merger was simply ill-conceived, and overpriced.

  3. Investors are not thrilled about Xohm, Sprint’s big venture into
    WiMAX service at 2.5GHz.

    My take: This is a serious fundamental disconnect between
    investors and management. The Xohm effort is something I earlier
    as follows: “Sprint’s 2.5GHz strategy is tied in my
    mind for “gutsiest US telco project” with Verizon’s FIOS project. If
    Sprint succeeds, they will have a sustainable advantage that their
    competitors cannot easily copy (for lack of spectrum).”

    The disconnect is that investors in Sprint are risk-averse,
    Blue-chip, dividend seekers. They invested in Sprint when it was a
    utility company. But Sprint’s “gambit” into WiMAX has taken them way out
    of the “utility company” comfort zone — and the reaction of the
    investors is as expected. With Xohm, Sprint’s risk profile is looking
    more and more like a big tech firm, say Yahoo or Apple. Today’s Sprint
    needs risk-seeking investors, not fixed-income seekers. Of course, the
    result is that Sprint is churning investors faster than it churns
    subscribers. And it’s easier to lose old investors than to gather new

    Perhaps existing investors would rather see Sprint sell off its
    2500MHz spectrum to some VC, private equity-backed group that could take
    the risk, and pay a dividend to shareholders. But that doesn’t make sense. It’s exciting to finally
    see a telco do something bold, take risks, and…yes…even get a bit
    desperate. Because it is in desperation that the telco will break ranks
    and do radical things, like give the customer what it wants. Xohm
    promises no long contracts, open-access to any compatible device, ample
    bandwidth, and reasonable and varied pricing plans. Damn, does that
    sound like a breath of fresh air! Techdirt is firmly in the camp that so
    doing, a telco would actually INCREASE the value of their products, and
    grow profits.

By no means is Xohm a slam dunk. WiMAX is, as
yet, largely unproven. Timing is essential, and any significant delays
will reduce the Sprint advantage. But an early success would radically
change the wireless landscape, and could not be readily copied by
competitors. In Sprint, we have the best of the capitalist system, where
the effort could succeed or fail, but in pushing the envelope by merely
entering the race, things are better for all consumers. Forsee or not, I
hope Xohm lives on.